The Parameters for Analysis of Windfall Recoveries in the Corporate Setting

Abstract

In 1903 when Dean Roscoe Pound, who was then Commissioner of the Supreme Court of Nebraska, decided that a corporation which was wholly owned by one stockholder could not sue the person from whom the present stockholder had purchased his stock, for mismanagement and waste allegedly committed before the purchase, he wrote: It is not the function of courts of equity to administer punishment. When one person has wronged another in a matter within its jurisdiction, equity will spare no effort to redress the person injured, and will not suffer the wrongdoer to escape restitution to such person through any device or technicality. But this is because of its desire to right wrongs, not because of a desire to punish all wrongdoers. If a wrongdoer deserves to be punished, it does not follow that others are to be enriched at his expense by a court of equity. A plaintiff must recover on the strength of his own case, not on the weakness of the defendant's case. It is his right, not the defendant's wrongdoing, that is the basis of recovery. When it is disclosed that he has no standing in equity, the degree of wrongdoing of the defendant will not avail him.